"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

As long as the short sellers can buy and sell Tesla shares, they can continue to function. As per this scheme, there will still be tons of buying and selling going on.

You say that based on what? A non-listed company can institute rule over how and when they allow shares to be bought and sold.

To short sell you need

A) someone to loan you their sharesB) an opportunity to sell the sharesC) and opportunity to buy the share back and return it to the original owner

According to Musks plan, there will still be tens of thousands of shareholders and millions of shares changing hands. No way in hell he can police that.

If the company goes fully private (i.e. LBO) there will be no way to lend out shares for someone to short at all.

Of course there would be. The existing institutions would continue to hold vast amounts of shares and would be happy to make a little cash loaning them out. He's still talking about having regular opportunities to buy and sell.

If he goes with the "delisting" idea being floated, it is possible that the shares could be sold short, but it would be dramatically more expensive for the borrowers and most institutions don't allow leverage on unlisted OTC stock. So the short sellers would have to constantly ensure their position was 100% funded.

Either way short selling would be dramatically reduced.

Everything in the above is covered in my prior post where I said that these things would make going short by you or I a lot harder. But that's not the issue here. Musk, and his fanboys, believe that the shorts are not regular people but rather powerful shady actors with access to hundreds of millions or billions of dollars each who are conspiring to sink the company outright by using negative media coverage to trigger a run on the stock and scare away investors / lenders. That's probably conspiracy crap, but if we take it at face value then these aren't people who are going to be easily discouraged by a few administrative changes. This proposal doesn't solve the stated problem.

The inability to support small shareholders’ desire to continue owning a stake would be a tiny snag. Worst case, a few insignificant people (like myself) will be disappointed that their investment stopped gaining in value. The larger institutional shareholders can stay on if they wish without any worries.

If fidelity wants to make a new-energy mutual fund with investment in Tesla and other such companies, I’ll move that cash to there, no problem.

SEC rules are a big problem with his plan to let small shareholders continue investing. It's true that if he comes up with a different plan that doesn't involve a lot of small investors then SEC rules would no longer be a problem.

So they’re a big problem to a minor component of the plan to go private.

It doesn't seem minor to me! I mean we know very little about what the actual plan is, which is a problem in its own right.

Agreed and adding my thanks for the article. Having an expert in securities law help navigate the requirements of such a transaction sets a fact based floor on the discussion.

The inability to support small shareholders’ desire to continue owning a stake would be a tiny snag. Worst case, a few insignificant people (like myself) will be disappointed that their investment stopped gaining in value. The larger institutional shareholders can stay on if they wish without any worries.

If fidelity wants to make a new-energy mutual fund with investment in Tesla and other such companies, I’ll move that cash to there, no problem.

SEC rules are a big problem with his plan to let small shareholders continue investing. It's true that if he comes up with a different plan that doesn't involve a lot of small investors then SEC rules would no longer be a problem.

So they’re a big problem to a minor component of the plan to go private.

It doesn't seem minor to me! I mean we know very little about what the actual plan is, which is a problem in its own right.

What is the timeline for releasing details that is actually REQUIRED by law? As far as I can tell from what little we know, the Board knows what is going on. The public knows what the offering price will be for the shareholder vote and that the finances are in place to do it at that price. Do we even know yet when that vote will take place? How much time before the vote do details HAVE to be released by law? If there is still time by law to release the actual plan, it seems like it is only a problem for short-term speculators on the stock and people trying to cover the story.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

But then Tesla would still be a public company. If what he said yesterday was a lie then he becomes liable for losses attributable to that misstatement. Getting rid of shorts is ok. Causing them losses by untrue statements is not ok.

Why is getting rid of shorts OK? Why is it not OK to bet against an overhyped overpriced company anymore than it is OK to pay an ever higher price for a company whether or not there is a financial basis to do so?

[quote="UrgeltMusk may have violated Wall Street's unwritten rules of comportment by using Twitter to make an announcement like this, but he's been violating unwritten rules of comportment all along. His purpose is to violently disrupt markets, not make friends with the fossil fuel-supporting investing community. (For the record, he has few friends, if any, in that crowd.)[/quote]

I'm not to worried about EV's if I'm a fossil fuel investor.

At this point our current technology, and for a long time into the foreseeable future, is still heavily reliant on fossil fuels to charge batteries, which thanks to Trump the power plant next door is burning coal again 7 years after having converted to oil and fucking up the air I breathe and that of all the children living, playing and going to school in it's shadows, especially on mornings of temperature inversion... it's a sickly gray.

So stop it with the strawman boogeymen as some kind of hindrance to EV technology. It doesn't exist

I suspect Musk is hoping that most of the existing Tesla shareholders will hold on to their shares and become investors in a private Tesla. In this way, he wouldn’t have to come up with any funding.

So the pitch is “Give Elon some multiple of $420 of your money for an asset that you can’t sell, can’t value, can’t get any information on and cannot control. And your only return is that maybe, at some point, when Elon feels like it, you might be able to cash out. Possibly. But hey, you get the satisfaction of having given Elon, (who apparently can’t control himself on twitter) money”

How does that sound like a good decision for you?

Full disclosure, I am long shares of TSLA, but you're absolutely correct that what you describe is the end result of this idea. But that isn't the pitch people are hearing.

The pitch heard is more like: "I have to buy back all the shares to get rid of these awful short sellers and Wall Street assholes who only care about quarterly numbers and not my long-term grand plan. This will let me stop wasting time and get on with my grand plan of revolutionizing the automotive industry. You can take the money, but I want to let you all choose to keep your shares and be part of my exclusive and special club."

And everybody's excited like they've got a time machine to buy shares of Apple from the 90s or Google's IPO.

While I believe Musk has the best of intentions, he's asking his investors to put themselves in a very vulnerable position with basically no ability to protect themselves from being totally wiped out if things go south or he gets hit by a rocket fairing and one of his big investors takes control. You can always sell a publicly traded stock and you can always check the CEOs tweets against SEC filings. But you have to ride private shares until they let you sell them, and that might never happen.

This is why the Securities Act of 1933 exists.

We do not have enough information yet to really know what he is asking. It entirely depends on just how much his "secured funding" wants to buy. If that "secured funding" wants very much to buy up every single share they can get their hands on and Musk insisted that he didn't want his word-of-mouth retail investor supporters to get pissed for forcing them to sell, the entire situation you describe concerning intentions and what investors are being asked to do changes.

All I am saying is that what you describe is true or not true depending on if the pitch to the smaller investors was done for PR reasons or for financial reasons because the "secured funding" was not large enough.

He's in trouble if he hasn't secured enough funding to buy out all the retail investors, the kind of trouble that puts people in jail, but I don't think that's the case.

I think as you say, he's insisting on finding a way to keep his retail investor supporters onboard while telling Wall Street and the short sellers to piss off; but it doesn't appear to be legally possible to do both.

I don't question his good intentions, but the fact remains, a small investor in a private company is pretty powerless to protect themselves--that's why companies go public if they want small investor access.

The inability to support small shareholders’ desire to continue owning a stake would be a tiny snag. Worst case, a few insignificant people (like myself) will be disappointed that their investment stopped gaining in value. The larger institutional shareholders can stay on if they wish without any worries.

If fidelity wants to make a new-energy mutual fund with investment in Tesla and other such companies, I’ll move that cash to there, no problem.

SEC rules are a big problem with his plan to let small shareholders continue investing. It's true that if he comes up with a different plan that doesn't involve a lot of small investors then SEC rules would no longer be a problem.

I think that depends on how the buyout goes. If Tesla were to restructure and leave some portion of itself that corresponds to the investment of non-accredited investors as a stub, those small investors would still be able to hold Tesla.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

But then Tesla would still be a public company. If what he said yesterday was a lie then he becomes liable for losses attributable to that misstatement. Getting rid of shorts is ok. Causing them losses by untrue statements is not ok.

Why is getting rid of shorts OK? Why is it not OK to bet against an overhyped overpriced company anymore than it is OK to pay an ever higher price for a company whether or not there is a financial basis to do so?

Nothing inherently wrong with shorting a company's stock.

However, Elon seems to be of the opinion that there are people out to get him and his company, and views any negative coverage of his company as part of some larger conspiracy to tank his company's stock price and profit from it.

In short, he views short-sellers as the biggest threat to Tesla's existence.

So from what I can gather, his rationale is that if you can't short Tesla's stock, any incentive to attack or otherwise harm the company would naturally vanish as well, leaving him to run his company as he deems fit with one less external threat.

One other thing that makes this all look kind of bad is Musk's tweet in June that 'shorts have about three weeks to cover' before their 'short position explodes.' At the time I thought he was referriing to resopnse to production and sales increases. Not in hindsight.

I suspect Musk is hoping that most of the existing Tesla shareholders will hold on to their shares and become investors in a private Tesla. In this way, he wouldn’t have to come up with any funding.

So the pitch is “Give Elon some multiple of $420 of your money for an asset that you can’t sell, can’t value, can’t get any information on and cannot control. And your only return is that maybe, at some point, when Elon feels like it, you might be able to cash out. Possibly. But hey, you get the satisfaction of having given Elon, (who apparently can’t control himself on twitter) money”

Musk ... believe that the shorts are not regular people but rather powerful shady actors with access to hundreds of millions or billions of dollars each who are conspiring to sink the company outright by using negative media coverage to trigger a run on the stock and scare away investors / lenders. That's probably conspiracy crap..

More than probably. Demonizing short sellers is not only a waste of time but it is counterproductive.

Short sellers are simply money managers with the opposite approach to a value investor such as (say) Warren Buffett.

They look at valuations in the market that appear to be too rich. They analyse debt, profitability, cash flow, and business potential to determine if money can be made betting against that high valuation. They are the part of the market that tries to anticipate rational investing. They try to trade ahead of the return of the price of a security to a normal level.

Musk demonstrated his immaturity by fixating on them. But he also set up the conflict with securities law by funding convertible debt with higher and higher valuations, even his own compensation. He created ample reasons for regulators to consider his actions as intent to manipulate the stock price.

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

You are not close. He dont need to buy what he owns already.

Elon have 22% ownership in TESLA already, and that's around $12-13+ billion - and he can also take this stocks and put them for loan and get another let's say $10 billion.

I would say he need's to come up with around $50-55 billion-ish to make this happen, and to be honest, there is a lot of money out there, and all you need is few "crazy" people to trust in what TESLA is doing to make it happen.

The inability to support small shareholders’ desire to continue owning a stake would be a tiny snag. Worst case, a few insignificant people (like myself) will be disappointed that their investment stopped gaining in value. The larger institutional shareholders can stay on if they wish without any worries.

If fidelity wants to make a new-energy mutual fund with investment in Tesla and other such companies, I’ll move that cash to there, no problem.

SEC rules are a big problem with his plan to let small shareholders continue investing. It's true that if he comes up with a different plan that doesn't involve a lot of small investors then SEC rules would no longer be a problem.

So they’re a big problem to a minor component of the plan to go private.

It doesn't seem minor to me! I mean we know very little about what the actual plan is, which is a problem in its own right.

Supposedly there's a group of investors (which includes Musk) willing to buy out the entire company at $420/share. To claim financing is secured, the group must have budgeted to buy everyone else out. If it's not true, then Musk and the board are guilty of fraud. Much more likely it is true and the full plan including the names of all the shell companies involved (to obscure the identity of the actual buyers) is being typed up in time for the next shareholders' meeting.

Musk is making noises that other investors not currently in the group might get a chance to join the group, and maybe there'll be a way for retail investors to join in as well. That might still fall apart, but it wouldn't likely take down the deal.

More likely to take down the deal is if the US government balks at having Saudi or Chinese or Canadian or whatever investors come in and scoop up this US company.

If it turns out to be Saudi money that privatizes Tesla, I'm going to enjoy watching the muskrats leap through logical hoops to from "we love Elon because he's saving the planet from big oil" to "we love Saudi Arabia and its delicious petrochemical industries and wonderful human rights record."

The inability to support small shareholders’ desire to continue owning a stake would be a tiny snag. Worst case, a few insignificant people (like myself) will be disappointed that their investment stopped gaining in value. The larger institutional shareholders can stay on if they wish without any worries.

If fidelity wants to make a new-energy mutual fund with investment in Tesla and other such companies, I’ll move that cash to there, no problem.

SEC rules are a big problem with his plan to let small shareholders continue investing. It's true that if he comes up with a different plan that doesn't involve a lot of small investors then SEC rules would no longer be a problem.

So they’re a big problem to a minor component of the plan to go private.

It doesn't seem minor to me! I mean we know very little about what the actual plan is, which is a problem in its own right.

Supposedly there's a group of investors (which includes Musk) willing to buy out the entire company at $420/share. To claim financing is secured, the group must have budgeted to buy everyone else out. If it's not true, then Musk and the board are guilty of fraud. Much more likely it is true and the full plan including the names of all the shell companies involved (to obscure the identity of the actual buyers) is being typed up in time for the next shareholders' meeting.

Musk is making noises that other investors not currently in the group might get a chance to join the group, and maybe there'll be a way for retail investors to join in as well. That might still fall apart, but it wouldn't likely take down the deal.

More likely to take down the deal is if the US government balks at having Saudi or Chinese or Canadian or whatever investors come in and scoop up this US company.

The nine members of the board have issued a statement that says that there is a discussion about taking the company private. No mention of of funding being agreed or even taking the company private. This is Musk shooting his mouth off trying bounce the board into doing what he wants.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

As long as the short sellers can buy and sell Tesla shares, they can continue to function. As per this scheme, there will still be tons of buying and selling going on.

You say that based on what? A non-listed company can institute rule over how and when they allow shares to be bought and sold.

To short sell you need

A) someone to loan you their sharesB) an opportunity to sell the sharesC) and opportunity to buy the share back and return it to the original owner

According to Musks plan, there will still be tens of thousands of shareholders and millions of shares changing hands. No way in hell he can police that.

If the company goes fully private (i.e. LBO) there will be no way to lend out shares for someone to short at all.

Of course there would be. The existing institutions would continue to hold vast amounts of shares and would be happy to make a little cash loaning them out. He's still talking about having regular opportunities to buy and sell.

Respectfully, you don't have a clue what you are talking about.

Stock lending isn't just something that long holders do. You need financial securities companies to facilitate the lending and borrowing. It is SEC regulated. There are rules and requirements around it. And you absolutely need a liquid marketplace for it to work.

None of this is possible with a fully private company. The only way to "short" private companies is to create specific bespoke structured products i.e. credit default swaps, and that is really a very different thing that shorting the stock. So in your example of institutions looking to "make a little cash loaning them out", it would require months of negotiated private contracts and a ton of investment just to set up a single deal.

If he goes with the "delisting" idea being floated, it is possible that the shares could be sold short, but it would be dramatically more expensive for the borrowers and most institutions don't allow leverage on unlisted OTC stock. So the short sellers would have to constantly ensure their position was 100% funded.

Either way short selling would be dramatically reduced.

Everything in the above is covered in my prior post where I said that these things would make going short by you or I a lot harder. But that's not the issue here. Musk, and his fanboys, believe that the shorts are not regular people but rather powerful shady actors with access to hundreds of millions or billions of dollars each who are conspiring to sink the company outright by using negative media coverage to trigger a run on the stock and scare away investors / lenders. That's probably conspiracy crap, but if we take it at face value then these aren't people who are going to be easily discouraged by a few administrative changes. This proposal doesn't solve the stated problem.

Again, short sellers in an OTC stock have to comply with their custodian's policies on shorting OTC names, and generally speaking most financial institutions either don't allow shorting of OTC stock at all or hold it at a 100% requirement.

This requires a little understanding of how financial markets work, but the vast majority of short sellers today are not required to maintain the full amount of collateral on their positions. Under an OTC-style plan, they would be.

So for example the day of Musk Tweets about this short sellers lost ~$1.3 billion in market value. This is a loss on paper, and under SEC Reg T or PM rules they shorts aren't required to pony up for the loss immediately. Under an OTC scenario, they would be required to ensure accurate collateral was posted immediately for any potential loss.

Also, OTC stocks trade FAR less than listed stocks, which means that the price would be more volatile, leading to far greater risk of short squeezes. Many institutional hedge funds and mutual funds have specific restrictions in their org docs prohibiting trading in these types of securities for these very reasons.

And as there would be much less liquidity, it would be much more difficult for financial institutions to source shares to lend out. That means that the short borrow rate that they charge short sellers would skyrocket. Even with the enormous amount of shorting in TSLA stock today, borrow rates are fairly low (seeing in the -0.5 range today). In more common parlance, they are not "hard to borrow", and so the interest cost to borrow them is fairly low. An OTC TSLA would jump immediately to very HTB status...I can't speculate exactly where but easily several factors more. That means that it would cost tremendously more for short sellers to finance their positions. Combined with the lack of leverage previously mentioned would drastically reduce shorts.

If it turns out to be Saudi money that privatizes Tesla, I'm going to enjoy watching the muskrats leap through logical hoops to from "we love Elon because he's saving the planet from big oil" to "we love Saudi Arabia and its delicious petrochemical industries and wonderful human rights record."

It will be especially interesting given their weaponization of investments in their dispute with Canada over Canada's criticism over their imprisonment of human rights activists.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

As long as the short sellers can buy and sell Tesla shares, they can continue to function. As per this scheme, there will still be tons of buying and selling going on.

You say that based on what? A non-listed company can institute rule over how and when they allow shares to be bought and sold.

To short sell you need

A) someone to loan you their sharesB) an opportunity to sell the sharesC) and opportunity to buy the share back and return it to the original owner

According to Musks plan, there will still be tens of thousands of shareholders and millions of shares changing hands. No way in hell he can police that.

That's not how shorting works in USA. This is the way it works:

1) You need to find someone to take the other end of the transaction2) To try to prevent shorting exceeding available shares, the SEC requires you to reserve shares, usually with a big brokerage, but you really have no access to those shares3) Then:3.a) If things go right, you liquidate the short position at a profit3.b) If things go mildly wrong, you liquidate the short position at a loss3.c) If things go horribly wrong, as is happening to the Telsa shorts right now, you have to buy shares in the open market to sell at a substantial loss to the people on the other end of the transaction.

With (3.a) and (3.b), the shares never change hands, just the unwinding of the speculative short position at a profit or loss.With (3.c), the s**t hits the fan and you get a "short squeeze" where the shorts have to purchase shares at vastly inflated priced and potentially incur massive actual losses.

If it turns out to be Saudi money that privatizes Tesla, I'm going to enjoy watching the muskrats leap through logical hoops to from "we love Elon because he's saving the planet from big oil" to "we love Saudi Arabia and its delicious petrochemical industries and wonderful human rights record."

Your enjoyment aside, when it comes to the history of where a country's wealth comes from, are you really singling out Saudi Arabia as somehow more ironic when attempting to link morality to wealth generation?

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

You are not close. He dont need to buy what he owns already.

Elon have 22% ownership in TESLA already, and that's around $12-13+ billion - and he can also take this stocks and put them for loan and get another let's say $10 billion.

I would say he need's to come up with around $50-55 billion-ish to make this happen, and to be honest, there is a lot of money out there, and all you need is few "crazy" people to trust in what TESLA is doing to make it happen.

If taken private no one would lend him money against his ownership interest because there is no reasonable way to liquidate the position. So aside from Musk's current ownership, every other dollar has to come from someone else. So he needs to raise $55 billion or so plus anything related to the debt that would be triggered due to a change in ownership.

Also if taken private the valuation comes under serious scrutiny because there is no cash flow to value. The value can only be derived from the value of the assets or other publicly traded car companies bleeding cash with production problems. Not a lot of comps out there. The valuation folks will have a play day with this one. But ultimately they'll come up with whatever price you pay them to come up with. I was in that business for a while. That pretty much how it works.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

But then Tesla would still be a public company. If what he said yesterday was a lie then he becomes liable for losses attributable to that misstatement. Getting rid of shorts is ok. Causing them losses by untrue statements is not ok.

Why is getting rid of shorts OK? Why is it not OK to bet against an overhyped overpriced company anymore than it is OK to pay an ever higher price for a company whether or not there is a financial basis to do so?

You simple?

Its not the shorts, its all the FUD thats being created by shorters to try to close their positions.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

no, this is about Musk getting rid of being responsible to shareholders. Musk may have 20% of the company, but if it goes private it gives him what he has always wanted which is free reign to do what he wants without being held accountable which would effectively give him 100% control.

If it turns out to be Saudi money that privatizes Tesla, I'm going to enjoy watching the muskrats leap through logical hoops to from "we love Elon because he's saving the planet from big oil" to "we love Saudi Arabia and its delicious petrochemical industries and wonderful human rights record."

According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. There are some nuances in how this number is calculated—most employees can be excluded, for example—but Tesla likely has more than 2,000 shareholders under any reasonable definition.

Historically, this requirement has been a significant factor in the largest tech companies going public. Google and Facebook were both forced to go public by an earlier version of the rule, which set the threshold at 500 employeesshareholders (the cap was raised after Facebook's IPO).

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

As long as the short sellers can buy and sell Tesla shares, they can continue to function. As per this scheme, there will still be tons of buying and selling going on.

You say that based on what? A non-listed company can institute rule over how and when they allow shares to be bought and sold.

To short sell you need

A) someone to loan you their sharesB) an opportunity to sell the sharesC) and opportunity to buy the share back and return it to the original owner

According to Musks plan, there will still be tens of thousands of shareholders and millions of shares changing hands. No way in hell he can police that.

That's not how shorting works in USA. This is the way it works:

1) You need to find someone to take the other end of the transaction2) To try to prevent shorting exceeding available shares, the SEC requires you to reserve shares, usually with a big brokerage, but you really have no access to those shares3) Then:3.a) If things go right, you liquidate the short position at a profit3.b) If things go mildly wrong, you liquidate the short position at a loss3.c) If things go horribly wrong, as is happening to the Telsa shorts right now, you have to buy shares in the open market to sell at a substantial loss to the people on the other end of the transaction.

With (3.a) and (3.b), the shares never change hands, just the unwinding of the speculative short position at a profit or loss.With (3.c), the s**t hits the fan and you get a "short squeeze" where the shorts have to purchase shares at vastly inflated priced and potentially incur massive actual losses.

This is closer, but not entirely accurate.

To make it really simple.

1. You request a "borrow" from your financial custodian.2. You sell the shares in the open markets, marking the order "short".3. You eventually cover the shares in the open markets, either collecting a profit if the share price declines or a loss if it rises.

Short selling takes place entirely in the markets except for in extremely limited scenarios.

Stock shorts are a bit of a red herring here. Private or public, if you own shares of a company, it's because you want them to succeed. There are going to be people who short TSLA, but every stock gets shorted and nobody makes a big fuss out of it like Elon does. There are plenty of good reasons to go private, but people shorting your stock is not one of them.

If you own shares of a company, it's because you think they will succeed.

If you're investing in who you want to be successful, that's your choice, but it's a bad strategy if your end goal is to increase the value of your investments.

It's totally possible, for example, to judge Tesla to be substantially overvalued and rationally short their stock, but still want Tesla to grow and flourish and be a successful car manufacturer (to head off the question, no, this is not me and I am not shorting Tesla stock).

Absolutely. People mistake shorting with wanting a company to fail. And while that may be true sometimes, albeit rarely, most shorts are simply arguing they think the price is too high and the fundamentals don't support it. And they are betting the market will correct and then they'll profit.

Something I learned long ago. Perhaps I read it somewhere. A good company does not always make a good investment. Meaning if you pay too high a price even for a good company, you're likely not to do so well from a return perspective.

I like Buffett's approach. "If you're a net buyer of hamburgers, why would you want the price of hamburgers to go up?"

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

But then Tesla would still be a public company. If what he said yesterday was a lie then he becomes liable for losses attributable to that misstatement. Getting rid of shorts is ok. Causing them losses by untrue statements is not ok.

Why is getting rid of shorts OK? Why is it not OK to bet against an overhyped overpriced company anymore than it is OK to pay an ever higher price for a company whether or not there is a financial basis to do so?

You simple?

Its not the shorts, its all the FUD thats being created by shorters to try to close their positions.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

no, this is about Musk getting rid of being responsible to shareholders. Musk may have 20% of the company, but if it goes private it gives him what he has always wanted which is free reign to do what he wants without being held accountable which would effectively give him 100% control.

In don't understand this. Why is this so? Serious question. He still will have only 20% of the company.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

But then Tesla would still be a public company. If what he said yesterday was a lie then he becomes liable for losses attributable to that misstatement. Getting rid of shorts is ok. Causing them losses by untrue statements is not ok.

Why is getting rid of shorts OK? Why is it not OK to bet against an overhyped overpriced company anymore than it is OK to pay an ever higher price for a company whether or not there is a financial basis to do so?

You simple?

Its not the shorts, its all the FUD thats being created by shorters to try to close their positions.

You dont hear on the national news every time a chevy crashes.

I dont think thats about shorters. I think that is about a product that claims to be safer that the rest gets big coverage when it crashes in ways that seem absurd. Sort of similar to the congressman that complains about over-coverage of his affair - after he ran on a platform of bringing honor and religion back to Amerca. It's the irony.